Exam 4: Accounting for Merchandising Operations

FOB _________________ means ownership of goods transfers to the buyer when the goods arrive at the buyer's place of business. The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit.

A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company later returned $275 worth of merchandise and paid the invoice within the 2% cash discount period. The total amount paid for this merchandise is:

A trade discount is:

A company had cash sales of $49,527, credit sales of $38,540, sales returns and allowances of $7,100, and sales discounts of $4,375. The company's net sales for this period equal:

Under the ___________ system, each purchase, purchase return and allowance, purchase discount, and transportation-in transaction is recorded in a separate temporary account.

From the adjusted trial balance for the Worker Products Company, prepare a multiple-step income statement in good form.

Beginning inventory plus the net cost of purchases is the _____________________.

The agreement regarding the amounts and timing of payment from a buyer to a seller are the ____________________.

Describe the recording process (including costs) for purchasing merchandise inventory using a perpetual inventory system.

An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a:

A wholesaler is an intermediary that buys products from manufacturers or other wholesalers and sells them to consumers.

With credit terms of 2/10, n/30, the seller is offering the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date. Otherwise, the full amount is due in 30 days.

The __________________ inventory system continually updates accounting records for merchandise transactions for the amounts of inventory available for sale and inventory sold.

The gross margin ratio equals net sales less ___________ divided by net sales.

A single-step income statement includes cost of goods sold as another expense and shows only one subtotal for total expenses.

A company reported the following year-end information: Cash \ 52,000 Short-term investments 12,000 Accounts receivable 54,000 Inventory 325,000 Prepaid expenses 17,500 Accounts payable 106,500 Other current payables 25,000 Required: a. Explain the purpose of the acid-test ratio. b. Calculate the acid-test ratio for this company. c. What does the acid-test ratio reveal about this company?

The acid-test ratio is also called the quick ratio.

Quick assets are defined as:

A company had sales of $350,000 and cost of goods sold of $200,000, which means gross profit is equal to $550,000.

The Merchandise Inventory account balance at the end of one period is equal to the amount of beginning merchandise inventory for the next period.